(Kitco News) - Wall Street and Main Street look for gold prices to rise in the first week of a Donald Trump presidency in the U.S.
Wall Street
78%
11%VS
Main Street
64%24%Analysts and traders cited both the uncertainty about a new administration and potential for Trump to jawbone the U.S. dollar lower in order to gain a trade advantage for the U.S.
Eighteen traders and analysts took part in a weekly Wall Street survey. Fourteen voters, or 78%, see gold prices rising by next Friday. There were two votes each, or 11%, for sideways and lower.
Meanwhile, 588 participants took part in the Main Street survey. A total of 379 participants, or 64%, called for gold to rise, while 141, or 24%, saw lower prices. The remaining 68 voters, or 12%, were neutral.
In last Friday’s survey, 61% of Wall Street voters and 67% of Main Street participants called for gold to rise this week. Just before 11 a.m. EST, they were both right for the second week in a row, as Comex February gold was up $7.50, or 0.6%, for the week so far, to $1,203.70 an ounce.
Going back to mid-May when this reporter started handling the Kitco News survey, Wall Street forecast correctly 22 times and was wrong 12 times, a winning percentage of 65%. Main Street had a 21-13 mark during this period for 62%.
“I am bullish on gold for next week,” said Colin Cieszynski, chief market analyst in Canada for CMC Markets. “Gold was due for a pause after a big run-up off the lows, but I see this as a rest stop within a bigger advance as USD (the U.S. dollar) still looks vulnerable to me. With Donald Trump taking the reins for his first full week in office, political risks and uncertainty is likely to increase as he could make a number of orders and policy pronouncements setting the tone for his presidency, which could attract capital back toward defensive havens like gold and the Japanese yen.”
Several survey respondents cited the potential for a pullback in the U.S. dollar to help gold. A weaker U.S. currency tends to help the metal as investors often buy gold as sort of an alternative currency when the dollar sags, plus a weak greenback makes all commodities cheaper in other currencies and thus can help demand.
“I still believe the dollar is the key,” said Kevin Grady, president of Phoenix Futures and Options LLC. “I think once Trump comes in, he will try to talk down the dollar.”
Grady said he looks for the new president to try this approach in an effort to help the U.S. trade position, before trying any other steps like outright intervention. In fact, Trump seemingly seemingly has already attempted this with recent comments about dollar strength.
Phil Flynn, senior market analyst with at Price Futures Group, also suggested potential for the greenback to ease after recent Trump dollar comments, suggesting the new president just might get an “inauguration gift” from the foreign-exchange market. Further, Flynn cited potential Chinese demand after a stronger-than-forecast reading on gross domestic product, the approach of the Chinese New Year and concerns about the country’s currency. “Physical demand should stay strong,” Flynn said.
Ira Epstein, director of the Ira Epstein division of Linn & Associates, said he looks for gold to trade higher until the end of January. “Uncertainty about what Trump does starting next week will be behind gold’s rally,” Epstein said.
George Gero, managing director with RBC Wealth Management, also looks for further gains. He cites the metal’s ability to hold up despite recent comments from Federal Reserve officials about potentially higher interest rates, as well as a ”phenomenal” jump of some 80,000 in Comex futures open interest since late December.
“There is going to be short covering ahead of options expiration,” Gero said. “There is also enough out there to worry international investors.”
Sean Lusk, director of commercial hedging Walsh Trading, also looks for gold to rise, commenting that “the path of least resistance” for now appears to be to the upside. “With a new administration, traders will want to see how things play out….Slight (price) dips will be bought.”
However, Lusk cautioned that the one factor that could derail a gold rally would be if the stock market takes off to the upside.
Peter Hug, global trading director of Kitco Metals, suggested that just might happen, which could dent enthusiasm for the yellow metal. “I think there might be a bounce in the equity market next week, which would suggest lower gold prices,” Hug said.
Robin Bhar, metals analyst at Societe Generale, looks for gold to be sideways until markets get more clarity about what policy initiatives will be coming from Trump. Previously, Trump has spoken in favor of cutting taxes and increased fiscal spending.
“Will he give more details about his policy plans?” Bhar asked rhetorically. “That will be the key for gold.”
Ralph Preston looks for the gold market to finish next week roughly where it finishes this week.
“I am actually looking for a potential spike to $1,240,” he said. However, “if we do not get a close above $1,200 by month-end, this may very well be the high for the year.”
By Allen Sykora of Kitco News; asykora@kitco.com
